DCIT CEN CIR 1(1), MUMBAI v. ROLTA SHARES & STOCKS P.LTD, MUMBAI

ITA 1356/MUM/2015 | 2007-2008
Pronouncement Date: 27-10-2016 | Result: Partly Allowed

Appeal Details

RSA Number 135619914 RSA 2015
Assessee PAN AAACR3156M
Bench Mumbai
Appeal Number ITA 1356/MUM/2015
Duration Of Justice 1 year(s) 7 month(s) 24 day(s)
Appellant DCIT CEN CIR 1(1), MUMBAI
Respondent ROLTA SHARES & STOCKS P.LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-10-2016
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 27-10-2016
Assessment Year 2007-2008
Appeal Filed On 05-03-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH JM AND SHRI RAJESH KUMAR AM ./ I.T.A. NO .1355 1356 1358 AND1360 /MUM/20 15 ( / ASSESSM ENT YEAR : 20 06 - 07 2007 - 08 2009 - 10 AND 2011 - 12 ) DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 1 (1) R.NO.903 9 TH FL. OLD CGO BUILDING M K ROAD MUMBAI - 400020 / VS. M/S ROLTA SHARES AND STOCKS PRIVATE LIMITED UNIT NO.10 17 TH FLOOR WORLD T RADE CENTRE - 1 CUFFE PARADE MUMBAI - 400005 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AAACR3156M / APPELLANT BY: SHRI K B SHUKLA / RESPONDENT BY SHRI GOVIND AG ARWAL / DATE OF HEARING : 24.10.2016 / DATE OF PRONOUNCEMENT : 10.2016 / O R D E R PER RAJESH KUMAR ACCOUNTANT MEMBER : THESE ARE THE FOUR APPEALS FILED BY THE REVENU E AGAINST THE SEPARATE ORDER S DATED 10.12.2014 PASSED BY THE LD. CIT(A) - 47 MUMBAI FOR THE ASSESSMENT YEARS 2006 - 07 2007 - 08 2009 - 10 AND 2011 - 12 RESPECTIVELY. SINCE ISSUE INVOLVED IN ALL THESE APPEALS IS COMMON THEREFORE THESE WERE CLUBBED 2 I.T.A. NO.1355 1356 1358 AND1360 /MUM/2015 TOGETHER HE ARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE . ITA NO. 1355/MUM/2015 2. G ROUND RAISED BY THE REVENUE IS AGAINST THE DELETION OF DISALLOWANCE OF RS. 26 61 748/ - UNDER SECTION 14A OF THE INCOME TAX ACT 1961 BY THE LD. CIT(A) WITHOUT APPRECIATING THE FACTS THAT SUB - SECTION 2 OF SECTION 14A WAS INTRODUCED WITH EFFECT FROM 1.4.2007 WAS ONLY C LARIFICATORY NATURE AND MAIN CLAUSE OF SECTION14A WOULD APPLY FROM THE INTRODUCTION OF SECTION ITSELF. 3. WE HAVE CAREFULLY C ONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW AND THE CASE LAWS RELIED UPON BY THE LD.AR. WE FIND THAT THE AO OBSERVED THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.97 58 289/ - A ND NO EXPENSES WAS SHOWN TO THE HAVE BEEN INCURRED IN CONNECTION WITH. ACCORDINGLY DISALLOWED AN AMOUNT OF RS.26 61 748/ - TOWARDS EXPENDITURES INCURRED FOR EARNING THE DIVIDEND INCOME. AGGRIEVED BY THE ORDER OF AO THE ASSESSEE PREFERRED AN APPEAL BE FORE THE LD.CIT(A) WHO PARTLY ALLOWED THE APPEAL BY DIRECTING THE AO TO R EDUC E THE INVESTMENT OF STRATEGIC NATURE MADE IN THE ASSOCIATE CONCERN OF THE ASSESSEE WHILE WORKING THE DISALLOWANCE MADE U/S 14A OF THE ACT. NOW AGGRIEVED BY THE ORDER OF LD.CI T(A) THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3 I.T.A. NO.1355 1356 1358 AND1360 /MUM/2015 4. WE FIND THAT THE SECTION 14A SUB - SECTION (2) WAS APPLICABLE WITH EFFECT FROM 1.4.2007 AND THEREFORE WE ARE NOT IN AGREEMENT WITH THE PLEA RAISED BY THE REVENUE. HOWEVER WE FIND THAT THERE HAS TO BE SOME DISALLOWANCE RELATING TO EARNING OF EXEMPT INCOME BY THE ASSESSEE. THEREFORE TAKING A CONSISTENT VIEW WITH THE EARLIER TRIBUNAL ORDERS WE DIRECT THE AO TO MAKE DISALLOWANCE @ 1% OF THE EXEMPT INCOME. ACCORDINGLY WE SET ASIDE THE ORDER OF LD .CIT(A). THIS GROUND IS PARTLY ALLOWED AND THE AO IS DIRECTED ACCORDINGLY . 5. THE ISSUE RAISED IN GROUND NO.2 IS AGAINST THE DIRECTING THE AO TO ALLOW SET OFF OF CARRY FORWARD LONG TERM CAPITAL LOSS OF RS.1 17 04 450/ - AGAINST SHORT TERM CAPITAL GAIN OF CURRENT YEAR WITHOUT APPRECIATING THE FACT THAT THE ASSESSEES CLAIM WAS DISALLOWED AS PER SECTION 74(1)(B) OF THE ACT. 6. WE FIND THAT THE LD.CIT(A) HAS ALLOWED THE SET OFF OF CARRIED FORWARD LONG TERM CAPITAL LOSS OF RS. RS.1 17 04 450/ - AGAINST THE SHORT TERM CAPITAL GAIN OF THE CURRENT YEAR FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH IN ASSESSEE OWN CASE IN WHICH THE CO - ORDINATE BENCH HELD AS UNDER: 8. FOR THE ASSESSMENT YEAR 2006 - 07 THE ASSESSING OFFICE HAS DISALLOWED THE SET OFF OF CAR RY FORWARD LONG TERM LOSS OF RS.1 17 04 450/ - AGAIN SHORT TERM CAPITAL GAIN OF CURRENT YEAR . THE SAID MAT T ER HAD BEEN DISCUSSED IN THE ASSESSMENT PROCEEDINGS U/S 143(3) DATED 13.12.2008. THE MATER TRAVELED TO THE ITAT AND IT IS SEEN THAT THE TRIBUNAL DI SMISSED THE DEPARTMENTAL APPEAL FOR CARRY FORWARD OF LONG TERM CAPITAL LOSS. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL THE AO IS DIRECTED TO ALLOW CARRY FORWARD LONG TERM CAPITAL LOSS OF RS.1 17 04 450/ - AGAINST SHORT TERM CAPITAL GAIN OF CURRENT YEAR FO R THE ASSESSMENT YEAR 2006 - 07 4 I.T.A. NO.1355 1356 1358 AND1360 /MUM/2015 7 . FROM THE ABOVE DISCUSSION IT IS CLEAR THAT THE LD. CIT(A) HAS CORRECTLY FOLLOWED THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE THEREFORE WE DO NOT FIND ANY MERIT IN THE SUBMISSIONS OF THE LD.DR AND AC CORDINGLY WE DISMISS THE APPEAL OF T HE REVENUE. THE AO IS DIRECTED ACCORDINGLY . 8. THE APPEAL OF THE REVENUE IS ALLOWED PARTLY. I.T.A. NO.1356/MUM/2015 8. GROUND TAKEN BY THE REVENUE READS AS UNDER: (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE C ASE AND IN LAW THE LEARNED CIT(A) WAS JUSTIFIED IN DELETI NG THE ADDITION OF RS.62 78 674 / - MADE ULS.14A WITHO UT APPRECIATING THE FACT THAT SUB - SECTION (2) OF SECTION 14A INTRODUCED W.E.F. 1.4.2007 WAS ONLY CE R TIFICATORY IN NATU RE AND MAIN CLAUS E OF SECTION 14A WOULD APPLY FRO M INTRODUCTION OF THE SAME IN STATUTE WHICH AUTHORIZES ASSESSING OFFICER TO MAKE DISALLOWANCE OF EXPENDITURE INCURRED FOR EARNING TAX FREE INCOME IRRESPECTIVE WHETHER ASSESSEE MAINTAINED SEPARATE ACCOUNTS OR NOT AS HELD BY THE HON'BLE KERALA HIGH COURT IN THE CASE OF DHANALAKSHMY BANK LIMITED (2011) 200 TAXMAN 29(MAG)/10 TAXMANN.COM 213 (KER)? 9 . WE HAVE ALREADY DECIDED AN IDENTICAL ISSUE IN ITA NO. 1355/MUM/2015 (AY - 2006 - 07) IN GROUND NO.1 THEREOF AND THEREFORE OUR D ECISION IN ITA NO.1355/MUM/2015 WOULD MUTATIS MUTANDIS APPLY TO THIS APPEAL AS WELL. THE AO IS DIRECTED ACCORDINGLY. 10 . RESULTANTLY THE APPEAL OF THE REVENUE STANDS ALLOWED PARTLY. 5 I.T.A. NO.1355 1356 1358 AND1360 /MUM/2015 I.T.A. NO.1358/MUM/2015 11 . GROUND NO.1 RAISED IN THIS APPEAL BY THE REVENUE IS AGAINST THE DISALLOWANCE OF RS.45 35 925/ - U/S 14A OF THE ACT BY IGNORING THE FACT THAT WORKING OF DISALLOWANCE U/S 14A READ WITH RULE 8D IS MANDATORY FROM THE ASSESSMENT YEAR 2008 - 09 ONWARDS. DURING THE COURSE OF ASSESSMENT PROCEEDING S THE AO NOTED THAT THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS.1 46 88 006/ - WHICH WAS CLAIMED TO AN EXEMPT INCOME. THE AO ALSO NOTED THAT THE ASSESSEE HAS NOT MADE ANY DISALLOWANCE OF EXPENSES ON I T S OWN WHICH THE ASSESSEE MUST HAVE INCURRED FOR EA RNING OF SAID INCOME . BESIDES THE AO OBSERVED THAT THE ASSESSEE HAS BORROWED FUNDS AND HAS INCURRED INTEREST EXPENSES OUT OF WHICH THE PROPORTIONATE DISALLOWANCE HAS TO BE MADE AND ACCORDINGLY AFTER ISSUING SHOW CAUSE NOTICE TO THE ASSESSEE U/S 14A RE AD WITH RULE 8D BY REJECTING THE REPLY OF THE ASSESSEE. IT WAS SUBMITTED BEFORE THE AO THAT THE ASSESSEE HAS CAPITAL AND RESERVE OF RS.17 .00 CRORES AGAINST T HE BORROWING O F RS.8 CRORES AND THE ASSESSEE COMPANY HAS PURCHASED SHARES OF OTHER COMPANIES AM OUNTING TO RS.27.08 CRORES WERE STRATEGIC INVESTMENT S AND NOT FOR THE PURPOSE OF EARNING DIVIDEND INCOME AND ALSO CAPITALIZED INTEREST AMOUNTING TO RS.3 74 35 207/ - AND THEREFORE NO DISALLOWANCE UNDER RULE 8D(2)(II) WAS ATTRACTED. WITH REGARD TO THE D ISALLOWANCE UNDER SECTION 14A READ WITH REULE 8D(2)(III) IT WAS SUBMITTED THAT NO EXPENDITURE WAS INCURRED BY THE ASSESSEE AND ACCORDINGLY NO DISALLOWANCE UNDER THIS SECTION WAS CALLED FOR AND 6 I.T.A. NO.1355 1356 1358 AND1360 /MUM/2015 HENCE THE AO MADE DISALLOWANCE OF RS.45 35 925/ - COMPRIS ING INTEREST OF RS.23 28 525/ - UNDER RULE 8(2)(II) AND RS.26 04 836/ - UNDER RULE 8D(2)(III). DURING THE COURSE OF APPELLATE PROCEEDINGS THE LD.CIT(A) DIRECTED THE AO TO RECOMPUT E AND REWORK THE DISALLOWANCE U/S 14A BY EXCLUDING THE INVESTMENT MADE FOR S TRATEGIC PURPOSE. NOW THE REVENUE BEING AGGRIEVED BY THE ORDER OF THE LD.CIT(A) HAS PREFERRED AN APPEAL BEFORE US. 12 . AT THE OUT SET THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE ISSUE RAISED IN THIS GROUND STANDS COVERED IN FAVOUR OF THE ASSES SEE BY THE DECISION OF THE C O - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN I.T.A. NO.1359/MUM/2015 (AY - 2010 - 11) ORDER DATED 26.7.2016 WHEREIN AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE . THEREFORE THE LD. COUNSEL SUBMITTED T HAT FOLLOWING THE ABOVE SAID ORDER THE APPEAL OF THE REVENUE BE DISMISSED. 13 . ON PERUSAL OF THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE (SUPRA) WE FIND THAT THE ISSUE INVOLVED IN THIS APPEAL HAS BEEN DECIDED BY THE TRIB UNAL IN FAVOUR OF THE ASSESSEE (WHEREIN THE AUTHOR IS ONE PARTY). FOR THE SAKE OF CONVENIENCE WE REPRODUCE RELEVANT PARAS AS UNDER : 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AU THORITIES BELOW AND THE CASE LAWS RELIED UPON BY THE LD.AR. THE ISSUE OF STRATEGIC INVESTMENTS IN 7 I.T.A. NO.1355 1356 1358 AND1360 /MUM/2015 THE SUBSIDIARY COMPANIES/SISTER CONCERNS ARE MEANT TO GAIN CONTROL OVER THE SUBSIDIARY COMPANIES/SISTER CONCERNS AND ARE NOT GOVERNED BY THE PROFIT CONSIDER ATION OR THE MOTIVE OF EARNING DIVIDEND FROM THE SAID INVESTMENTS. THEREFORE FOR THE PURPOSE OF DISALLOWANCE U/S 14A R.W.R.8D(2)(III) THE INVESTMENTS IN THE ASSOCIATE CONCERN ARE NOT TO BE CONSIDERED AS HAS BEEN HELD IN THE AFFORESTATED CASES. 6. IN VIE W OF THE RATIO LAID DOWN IN THE ABOVE DECISIONS WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE RAISED BY THE ASSESSEE IS SQUARELY COVERED IN FAVOUR AND THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 1 4. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL WE UPHOLD THE ORDER OF LD CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. I.T.A. NO.1360 /MUM/2015 1 5. GROUNDS OF APPEAL TAKEN BY THE REVENUE IS AS UNDER : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LEARNED CIT(A) WAS JUSTIFIED IN DELETI NG THE DISALLOWANCE OF RS. 3 35 57 910/ - U/S 14A OF THE IT ACT IGNORING THE FACT THAT WORKING OF DISALLOWANCE U/S 14A READ WITH RULE 8D IS MANDATORY FROM AY 2008 - 09 ONWARDS AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF GODRE J AND BOYCE MFT.CO.LIMITED (328 ITR 81) 16 . WE HAVE ALREADY DECIDED AN IDENTICAL ISSUE IN ITA NO. 1358/MUM/2015 (AY - 2009 - 10) IN GROUND NO.1 THEREOF AND THEREFORE OUR DECISION IN ITA NO.1358/MUM/2015 WOULD MUTATIS MUTANDIS APPLY TO THIS APPEAL AS WELL. THE APPEAL OF THE REVENUE IS DISMISSED. 8 I.T.A. NO.1355 1356 1358 AND1360 /MUM/2015 1 7. IN SUM AND SUBSTANCE APPEALS BEARING ITA NO.1355 AND 1356/MUM/2015 ARE PARTLY ALLOWED AND THE APPEALS BEARING ITA NO.1358/MUM/2015 AND 1360/MUM/2015 STAND DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 27TH OCT 2016 . SD SD ( MAHAVIR SINGH ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 27 . 10. 2016 SR. PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. / D R ITAT MUMBAI 6. / GUARD F ILE / BY ORDER TRUE COPY / (DY./ASSTT. REGISTRAR) / ITAT MUMBAI